More walk-outs may follow, warn worried F1 insiders

Friday 5 December 2008 19.01 EST
First published on Friday 5 December 2008 19.01 EST

The lack of a current and binding contract between formula one's constructors and organisers has left the sport ever more vulnerable to walk-outs by the richest teams, insiders claimed yesterday.

Under the previous Concorde Agreement, which expired two years ago, constructors' parent companies faced onerous fines if they quit the circuit as Honda Racing chose to do this week. However, insiders say the continued absence of a new deal has left CVC Capital, a private-equity group which owns the commercial rights to the sport, powerless to prevent other major brands walking away.

"As a team you couldn't leave the sport because it was a breach of the Concorde Agreement contract," said a source at the Formula One Teams Association. "But as that doesn't exist you have a set of agreements now that makes it less difficult to leave than before."

CVC's own accounts describe the absence of a Concorde Agreement as the company's "principal business risk" and Honda, the most successful engine manufacturer in the history of formula one, walked away from investments worth hundreds of millions of pounds on Thursday. CVC has claimed that the only impediment to a new Concorde Agreement has been a row over the technical arrangements associated with the thrift programme being introduced by Max Mosley's world governing body, the Fédération Internationale de l'Automobile.

Meanwhile teams have also been eyeing a bigger share of the profits generated by formula one. CVC took out $2.4bn in bank loans to finance its purchase of grand-prix racing, which cost $229.6m in bank interest alone last year. With that sum set to leave the sport every year, there has been talk among the teams of "anger" towards the commercial rights-holder, as well as demands for a greater share of the spoils. Formula one's commercial rights holder, Bernie Ecclestone, however, is refusing to budge. "We have an agreement with the teams that they receive 50% of the [pre-tax profits]," he said. "What we do with our 50% share is up to us."

The commercial agreement for the 2008 to 2012 seasons, reached in the absence of a binding Concorde accord, has seen the prize fund available to the teams double to $500m from $250m. Yet at a time when the teams are being urged to drop a costly element of their research-and-development programmes in favour of standardised engines, some teams are reluctant to lose their independence when they feel the sport's owners could do more.

Nick Clarry, a CVC director, was unavailable for comment yesterday but Duncan Llowach, his boardroom colleague, has previously told the Guardian that, despite the current financial climate, the profit-share agreement between his company and the teams has provided unexpectedly healthy returns. "The numbers they will receive are well in advance of what was anticipated," he said.

But there is also dismay within Fota that chasing big race fees in emerging territories, which has helped boost the sport's central funding in recent years, is being done at a heavy cost to the sport's following. "The sport should be accepted locally," said the insider. "You go to Indianapolis, which is not one of the US's most desirable tourist destinations, and you get 180,000 spectators. Go to Bahrain and you get 4,000, which is embarrassing."

Meanwhile Honda's withdrawal from Formula one has been met with an immediate sense of concern among other manufacturers and suppliers in the sport with Mercedes, who provided the engine with which Lewis Hamilton powered to the championship this year, calling for all teams to slash their overheads by half.

"Within Fota we are working hard on measures to cut costs and over the next two years we must achieve cuts of at least 50 per cent," said Norbert Haug, vice-president of Mercedes Motorsport. "The pull-out of Honda is very sad. It shows how important the cost-cutting measures are that we've been advocating for more than five years and which have only been realised to a small degree."